Transcript + DOING GOOD WIND BUSINESS IN SOUTH AFRICA – EWEA 2014 Johan van den Berg CEO, SAWEA.

+
DOING GOOD WIND BUSINESS
IN SOUTH AFRICA – EWEA 2014
Johan van den Berg
CEO, SAWEA
SUMMARY OF CONTEXT AS PER HAND-OUT INFORMATION
• South Africa is a top 30 global economy with about 45,000 MW installed, and
a very good wind regime
• Policy is favourable to wind power and envisages about 9,000 MW‘s installed
by 2030
• Growth in the past years has been rapid
• Localisation, socio-economic development and the advancement of
previously disadvantaged South Africans are factors that are important
alongside the cost of energy delivered.
• Successful bids over the three procurement rounds averaged around € 0.11
(R1); € 0.08 (R2) and € 0.06 respectively
• Average windfarms are large – > 80 MW
• Capacity factors on successful bids on P50 are 35% +
WIND REGIME
PROCUREMENT FRAMEWORK
• Competitive bid system within technologies for allocated MW‘s
• 70% price
• 30% other - socio economic development - local ownership, local content,
job creation, community development etcetera – strong local content
requirements
• Process requires extensive documentation (7 x 5,000 pages) and implies
significant cost (€ 200k – 400k in bid preparation)
• Game for big and sophisticated players
INDUSTRY GROWTH
INDUSTRY GROWTH (2)
INDUSTRY GROWTH (3)
FIVE MAIN CHALLENGES EXERIENCED
• Securing permits and approvals
• Preparing a competitive bid that complies with REIPPPP rules
• Structuring socio-economic benefits in an optimal and sustainable manner
• Complying with local content requirements
• Ensuring grid access
PERMITS AND APPROVALS
• Similar to other jurisdictions
• Environmental impast assessment – about a 15 month process costing about
€ 70,000 (birds, bats, visual impact, heritage, agricultural land). But the
country is very large (Germany + France + Italy) and there is usually a place
to go
• Act 70/1970 – agricultural land
• Radar/air force
• Others
• SA has extremely sophisticated law firms that understand this very well by
now
PREPARING A COMPETITIVE BID THAT COMPLIES
WITH REIPPPP RULES
• As said above, 70:30 price/socio economic factors
• There are minimum thresholds on certain socio economic aspects
• The drive to empower, develop communities close to the projects is perhaps
a world first and if successful, will create tremendous political capital
• Suggest buy into the spirit of what is being aimed for, rather than “ticking
boxes“
• In round 3, some communities had 40% shareholding in projects – this is
financed by local banks through innovative structures
PREPARING A COMPETITIVE BID THAT COMPLIES
WITH REIPPPP RULES (2)
• The sophistication of the process requires expert advisors and leads to
“bidding costs“ of € 150 – 300k
• Bid bonds of about € 7,000/MW bid are required to ensure only responsible
participants bid – these are doubled at preferred bidder stage
STRUCTURING SOCIO-ECONOMIC BENEFITS IN AN OPTIMAL
AND SUSTAINABLE MANNER
• Main drivers are ownership by previously disadvantaged South Africans
(“BBBEE“); economic development of communities; community ownership;
socio economic benefits from wind farms (schools, health clinics, pension
schemes)
• The community‘s needs must be well understood
• Find out “who is the community?“ and who speaks for them
STRUCTURING SOCIO-ECONOMIC BENEFITS IN AN OPTIMAL
AND SUSTAINABLE MANNER (2)
• Recruit able and responsible peope to serve on Community Trusts
• Employ expert consultants to optimise bid
• Non-fulfillment of obligations can ultimately be a contractual termination
event – so hire the best to ensure iongoing compliance and optimisation
• See the opportunity not the onus
COMPLYING WITH LOCAL CONTENT REQUIREMENTS
• Industrialisation, job creation through localisation are key reasons for
government‘s strong support of wind power
• Thresholds started at 25% in Round 1 and are now at 40%
• Breakdown, approximately, is Balance of Plant 25%; tower up to 15%, blade
up to 15%, turbine approx 45%
• Both steel and cement towers now made in SA
• Hope that international blade manufacturer will come soon with certification
COMPLYING WITH LOCAL CONTENT REQUIREMENTS (2)
• SA makes Mercedes Benz 180 for the world market, so the ability is there
• Distributed/hybrid electricity market in Africa includes 600 million people
without electricity
ENSURING GRID ACCESS
• Present wind farms are aiming at locations where deep connection costs and
their concomitant costs can be avoided
• This means small/medium sized wind farms with “loop in loop out“
arrangements can be made, or proximity to large substations with spare
evacuation capacity
• Opposing projects (also solar) can sometimes sterlise grid if they succeed
• Eskom the utility gives buget quotes (estimates) prior to bid
• These are fully quantified later on – variances still too wide
• SAWEA assisting Eskom with long term, strategic grid planning to unlock high
potential areas
SEE YOU SOON!
THANK YOU
Johan van den Berg
CEO SAWEA
[email protected]
082 925 5680